The myth of 'write a mobile app, make a mint'

Can developers make money on mobile applications?

By Keith Ward

Aug 24, 2010

Can developers make money on mobile applications? It's a question many have asked. The answer: Yes, but evidence suggests that expectations should be realistic -- hitting it big with an app can be akin to winning the lottery.

There are lots of mobile platforms on which to build, and another biggie will be unveiled later this year, when Microsoft lifts the covers off of Windows Phone 7. But competition, even in such a young market, is brutal, and getting an app noticed is getting harder and harder.

Not many developers are willing to share sales numbers, which is why Arron La's experience is instructive. La created an app for the Android Market called "Advanced Task Manager," to kill running services that some apps wouldn't release at shut down.

The app, which debuted at .99 cents, went live in Feb. 2009, La writes on his blog. In November, he released a free, ad-supported version. Since that time, he estimates that he's made about $80,000 on the app, and says he's currently making "around $10,000 a month after all cuts" -- in other words, after his costs, like the 30 percent royalty Google gets. That's what prompts La to conclude that "Android is a viable revenue stream." He noted that the revenue was based on roughly 90,000 total installs of the Advanced Task Manager.

It's easier for La to make a profit, though, since he appears to be a one-man shop (he says he works full-time for IBM). Mobile app development companies have much higher expenses, and a gross of $10,000 per month would quickly force them into bankruptcy.

Although La's situation is Android-related, the profits problem applies to the iPhone as well. That bucks public perception, which is that developers on Apple's iOS platform do much better, with overnight success stories abounding.

The reality is much harsher. Last year, for example, Newsweek ran a story on the struggles iPhone developers face, like intense competition from peers and big development houses which can afford to give apps away for free as a way to drive marketing and their brand. The story quoted a Forrester Research estimate that most iPhone apps take six months of full-time development, with costs averaging between $20,000 - $150,000. "Of the 85,000 that have been accepted, only a few hundred sellers have much chance of supporting full-time work," the story states.

Another tale of woe is spun by Gedeon Maheux the Iconfactory, which made the very popular and well-regarded iPhone app Twitteriffic. "The App Store is broken," Maheux writes. He echoes the complaints of other developers and points to two main problems: pressure to drive prices down and visibility.

Concerning prices, Maheux states, "The utter race to the bottom of the pricing structure by thousands of developers has created tremendous pressure to set applications at either free or near free price points." This claim is bolstered by statistics from app store analytics firm Distimo, which reports that the average price for popular apps is now $2.43 -- a steep decline from a few years ago, when prices averaged around $5.50. Twitterrific, blogs Maheux, was dropped from $9.95 to $3.99 in order to compete.

With such low prices, making a profit or even breaking even can be a daunting challenge. An article from FierceMobileIT quoted figures from online game consultant Adam Martin, who surveyed 85 iPhone developers last year. Although the numbers are a bit old, they're still striking: 52 percent of developers earned less than $15,000 from their App Store app, while a full third earned less than $250.

What does that mean for the future of development? In Maheux's case, at least, he says it may mean turning to more predictable sources of income:

"In order for a developer to continue to produce, they must make money. It's a pretty simple concept and one that tends to get lost in the excitement to write for the iPhone. It's difficult for me to justify spending 20-50 hours designing and creating new 99¢ levels for [his game] when I could be spending that time on paid client work instead."